MANILA - The rebalancing of growth in China is expected to moderate the economic expansion of Asia-Pacific countries, prompting the World Bank to scale down its growth forecast for the Philippines in 2014 and 2015.
In the June edition of the Global Economic Prospects (GEP) 2014 report, the Washington-based lender said the Philippine economy is now expected to grow by 6.6 percent in 2014, 6.9 percent in 2015 and 6.5 percent in 2016 in terms of gross domestic product (GDP).
These projections were revised from the January 2014 edition of the GEP, where the World Bank projected the country’s economy to grow by 6.5 percent in 2014, 7.1 percent in 2015 and 6.5 percent in 2016.
“The outlook for the East Asia and the Pacific region remains influenced by the pace of rebalancing in China, volatility and the eventual tightening of external-financing conditions, as monetary policy is normalized in high-income countries, and a recovery in global demand for exports,” the bank said.
“Outside of China, regional growth is projected to slow somewhat in 2014 as a result of domestic-policies tightening and political tensions,” it added.
Apart from China, the WB also said other threats that could cut the growth of the developing economies worldwide include the bad weather in the United States, which could dampen demand, and the crisis in Ukraine.
The bank also said political strife in several middle-income economies like Thailand, slow progress on structural reform and capacity constraints contribute to a third straight year of sub-5-percent growth for the developing countries, as a whole.
The bank lowered its forecasts for developing countries, now eyeing growth at 4.8 percent this year, down from its January estimate of 5.3 percent. Signs point to strengthening in 2015 and 2016 to 5.4 and 5.5 percent, respectively.
Further, the multilateral lender said China is expected to grow by 7.6 percent this year, but this will depend on the success of the rebalancing efforts. If a hard landing occurs, the impact could be felt across Asia.
“Growth rates in the developing world remain far too modest to create the kind of jobs we need to improve the lives of the poorest 40 percent,” WB Group President Jim-yong Kim said.
“Clearly, countries need to move faster and invest more in domestic structural reforms to get broad-based economic growth to levels needed to end extreme poverty in our generation,” he added.
The bank said the structural-reform agenda in many developing countries, which was stalled in recent years, need to be reinvigorated in order to sustain rapid income growth.
“Spending more wisely rather than spending more will be key. Bottlenecks in energy and infrastructure, labor markets and business climate in many large middle-income countries are holding back GDP and productivity growth. Subsidy reform is one potential avenue for generating the money to raise the quality of public investments in human capital and physical infrastructure,” said Andrew Burns, lead author of the report.
However, growth in developing countries like the Philippines could be supported by the recovery of global demand. The bank said high-income countries are expected to drive global demand in the next three years.
It expects high-income countries to create an additional $6.3 trillion to global demand over the next three years, higher than the $3.9-trillion increase in the past three years.
The bank also noted that this increase in global demand is also more than the expected contribution from developing countries.
As a result, the global economy is expected to pick up speed as the year progresses and is projected to expand by 2.8 percent this year, strengthening to 3.4 percent and 3.5 percent in 2015 and 2016, respectively.
The GEP added that high-income economies will contribute about half of global growth in 2015 and 2016, compared to less than 40 percent in 2013.